What’s the problem with blockchain being applied to the real sector?

Distributed LabBlogWhat’s the problem with blockchain being applied to the real sector?

Even a perfectly tested and ready-to-run system can very often experience essential problems related to the integration of it into the existing infrastructure. We would like to share our own practical case. Back then — two years ago, we’ve learned a very good lesson out of it.

The case

In 2016, we have been working on the technical part of the development of a decentralized auction by IDF Reforms Lab. The main concept was the creation of a transparent environment for land property trading, where transparency provides for a fair competition and excludes political censorship or other limitations towards the trading platforms. The system was supposed to collect the data from independent trading platforms in one shared accounting system, making a common-for-all database that doesn’t rely on a single party, instead, is managed mutually.

The development of a pilot version took about a couple of months. Once it was done, we’ve begun the technical integration with the new trading venues (those that were initially created with the purpose to operate within our system). Everything went like clockwork. Though we’ve come across major issues on the stage of integrating the system into the long-established trading platforms. Their juridical departments were demanding conclusion of contracts on the supplying, operation and development of the system.

Why it didn’t work

No one responded on our arguments that system is blockchain-based and includes all the peculiarities of mutual managing and taking of risks and responsibilities.

Decentralized systems don’t act under the conventional, for us, rules. If it were a third-party service that maintains the common for all trading platforms database (kind of eBay) — this service would have been taking all the risks and organizing the whole working process (This is a paid work the third-party does). The decentralized system excludes such intermediaries, correspondingly, excludes the responsible party. Our current jurisdiction, in the majority of cases, does not cover the existence of suchlike systems, where everyone takes their own risks.

There was basically no solution. In this situation, we either would’ve had to establish a separate organization that would operate the blockchain or hand over reins to the government. Both options contradicted the main idea of decentralization. The project was closed down. But later, it has found its application in the commercial sector as a Shelf.network. Now it’s fully functional:)

What should be done?

Most likely, we will be observing the proceeding of the following activities, that said, they will be carried out in parallel with each other:

  • The advent of preconditions (or drivers) for the blockchain application (digital identity, digitization of all processes, single rules to mutual decision making, legally binding digital environment and so on.)
  • The preparation of specialists (Cross-utilization and specialized training of specialists in the sphere of decentralization)
  • The formation of the new mindset and standards in the society (The mindset that would consider the relationships in completely or partially decentralized systems)

Some food for thought

Leonardo Da Vinci described the concept of the helicopter as early as in the XV century, although we’ve managed to put helicopters into practice as late as five centuries later. Today, many investments in the blockchain technology look similar to the investments in everything that’s barely similar to helicopter in the Da Vinci times. That’s quite a restless comparison. But the good news is that it won’t be five centuries:) Blockchain will steadily develop its roots in our living environment and, in the very near future, we will be able to observe how the seeds we’ve sawn have evolved into a mighty tree.

Pavel Kravchenko
About the author

Founder & cryptographer